Emerging market debt holds on despite equities pullback; NGC Trinidad sells $400 million of bonds

By Reshmi Basu and Paul A. Harris

New York, Jan. 17 - Emerging market debt remained resilient Tuesday despite a pullback in equity markets in response to higher oil prices.

In the primary market, National Gas Co. of Trinidad and Tobago Ltd sold $400 million of 30-year bonds (A3/BBB+) at 99.617 for a spread of Treasuries plus 158 basis points.

Citigroup and Lehman Brothers were joint bookrunners for the Rule 144A/Regulation S deal (with no registration rights).

In other primary news, Kazakhstan's Bank TuranAlem, via its special-purpose vehicle BTA Finance Luxembourg SA, is expected to price an upsized offering of $400 million in hybrid tier I perpetual preferred securities (Baa3/B-/B+) on Wednesday.

The securities are expected to yield 8 ¼%.

Credit Suisse and ING are managing the sale.

The bank plans to raise an additional $1.5 billion of senior debt in capital markets this year, according to a buyside source.

EM resilient

During Tuesday's session, sovereign bonds held even as equity markets were pressured from spiking oil prices, according to a market source.

Oil prices topped $66 per barrel, hitting its highest level since late September on political uncertainty in Iran and Nigeria. The African nation has seen recent militant attacks targeted at oil companies, which has resulted in a 10% loss of daily output, said another source.

The market source added that he was surprised by such "resilience as spreads [on the EMBI+] were generally unchanged for the day."

Overall, Latin American sovereigns did not buckle even as local and U.S. equity markets stumbled, according to Enrique Alvarez, Latin American debt strategist for think tank IDEAglobal.

"The U.S. equity market has been serving as a price-driving factor for Latin America over the last few weeks," remarked Alvarez, adding that the region appeared immune Tuesday to the oil spikes and U.S. equity fall.

Positive flows into emerging markets debt coupled with a belief that U.S. short-term rates will dip below 4½% most likely at the end of January are giving the market its resilience, noted Alvarez.

"I think people are focused on the longer term prognosis for the market, which says that if you hold higher yielding assets you should be alright down the road," he said.

During the session, the Brazilian bond due 2040 was down 0.40 to 130.05 bid, 130.15 offered.

Also, oil producers moved higher. The Ecuadorian bond due 2030 added a quarter of a point to 93¾ bid, 94½ offered. The Russian bond due 2030 rose 0.13 to 112 7/8 bid, 113 offered. The Venezuelan bond due 2027 gained 0.35 to 121.55 bid, 122 offered.

Elsewhere, the Nigerian par bond was unchanged at 100 bid, 101 offered.

Peru regains on poll news

Out of Peru, nationalist candidate Ollanta Humala is in first place, ahead of Lourdes Flores in April's presidential race, according to the latest Apoyo poll.

The news helped spark a rebound in Peruvian bonds. During the session, the Peruvian bond due 2012 added 0.65 to 113¾ bid, 114.35 offered.

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